3 European Dividend Stocks to consider for your portfolio

My dividend growth investment strategy involves investing monthly in dividend growth companies to reach F.I. within the next ten years. Typically, I look for companies that are already in my portfolio at a price I deem to be fair using a variation of DCF, DCM, and P.E. ratios.

Since the pandemic, the market has recovered at an impressive rate which is excellent news for Value and Growth Investors. It provides these types of Investors a chance to take some profits off the table. However, it can make the job of a dividend growth investor a little bit harder. With Higher prices, the starting yield will be lower, affecting an investor’s total overall returns.

Since the beginning of 2021, My Dividend Growth Portfolio has changed from a US-dominated portfolio to a more balanced mix between U.S. and European dividend stocks. While I love companies like Microsoft, it is difficult to justify purchasing a company with a P.E. ratio of 38 in large amounts. Better opportunities might lie in the European market.

European companies are a little more cautious when it comes to distributing dividends. Usually, a European company will aim for a payout ratio below 50%, leading to unpredictable dividends, particularly in tough times. However, some companies have a proven track record of rewarding shareholders, and I have listed the companies I own in my portfolio below.

Danone

Danone, headquartered in Paris, France, is a consumer staple operating in over 130 countries across all five continents. They strive to meet the needs of consumers through health-focused and sustainably produced food and beverages. Although Danone’s roots began in Barcelona, Spain, in 1919, It was not until 1972 when BSN and Gervais Danone merged that company as we know it today was formed.

Danone reports in three central business units; specialized nutrition, waters, and dairy and plant-based products. Popular brands include Actimel, Activia, and Evian, which helped generate €23.6 billion in 2020.

Danone has been paying a dividend since 1995 and has a 4.9% annualized dividend growth rate over the last ten years. Unfortunately, the company recently cut its dividend by 8%, which was slightly annoying, but the company holds a vital catalyst as the world transitions to become more health-conscious.

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The company released its first-quarter results in April 2021. Covid has had a significant impact on the company, particularly in the water segment. The good news is that in each of the last three quarters, we have seen gradual improvement, and this trend will continue as vaccines are rolled out, and lockdown restrictions ease.

Danone currently represents 7% of my portfolio, and I would look to add more shares if the company dips below €50. For a more in-depth review, I would highly recommend checking out my friend, European DGIs company review here.

Unilever PLC

(LSE: ULVR, Euronext: UNA, NYSE: UL)

Unilever plc is a global consumer staples conglomerate that produces some of the most recognized European brands. Headquartered in London, United Kingdom, Unilever is listed on the NYSE, London Stock Exchange, and Euronext Amsterdam. The company has recently unified its corporate governance under Unilever Group, combining Unilever NV and Unilever PLC on 29th November 2020.

Unilever has more than 400 brands, including Vaseline, CIF, Domestos, Knorr, and Dove, found in over 190 markets. The company owns 14 of the top 50 consumer goods brands, 13 of which generate over €1 Billion in revenue.

The company released the Q1 2021 trading statement on 29th April, showing a 5.7% increase in underlying sales growth. Asia and North America returned to solid growth while Europe is lagging.

The company has substantial cash flow generation and rewards the shareholders through share buybacks and dividends. Unilever has a strong dividend history and has paid a dividend since 1999. The company will deliver the next quarterly dividend of €0.4268 per share will be paid in June.

Enagas SA

(BME: ENG)

Enagas is a Spanish energy company that also serves as an energy transmission system supplier for the large European market. The company owns and operates Spain’s natural gas grid and is a regional European transmission system operator (TSO). In addition, the company owns a 10,000 KM natural gas pipeline, enabling them to deliver gas to eight European countries.

I like investing in European companies that give me some international exposure, particularly in the United States. While I don’t often pay attention to currency fluctuations as I expect them to average out over time, it can affect my overall total returns. With Enagas, I benefit from investing in Euros while also gaining exposure to firms like Tallgrass Energy in the U.S. due to their partnership agreement.

As a Divided growth investor, a stable and growing dividend is essential. Enagas has committed to increasing and maintaining a dividend of €1.74 by 2026. The current forward dividend is currently €1.68, representing over a whopping 8% yield.

Utilities are boring and predictable, which is something that I love. Of course, political risks are always present, but I am happy to own Enagas to at least 2026 and beyond if they stick to their existing dividend policy.

Top 10 Best European Dividend Stocks for 2021

Full disclosure, I own all three companies listed above. I would love to hear your thoughts below and also what companies you recommend I should consider adding to my portfolio.

Recommendations

Simply Investing Report review – For investors who might like to have all the research done for them

Sure Dividend – Ben and his team help individual investors build high-quality dividend growth portfolios for the long run and offer a lot of excellent content for free. I also write company review articles on Sure Dividend each Quarter.

EuropeanDGI – My buddy, is a no bull, passionate dividend growth investor. Check out his blog, you tube channel and our Podcast Dividend Talk

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